Diaz v. Silver Bay Logging, Inc.

FABE, Chief Justice,

with whom BRYNER, Justice, joins, dissenting.

I. INTRODUCTION

Due to the remoteness of Silver Bay's logging operations and the fact that it frequent*738ly moved those operations during the logging season, it was necessary for Silver Bay to house its employees on "highly mobile, waterborne" barges in order to conduct its business. Thus, Silver Bay's board and lodging facilities were indispensable to Silver Bay's logging business and were furnished primarily for Silver Bay's convenience. No alternative public facilities were available to Diaz that were accessible to Silver Bay's worksite, and it was not Diaz's choice to live at Silver Bay's facilities. For these reasons, the cost of the board and lodging provided by Silver Bay cannot be deducted from Diaz's earnings.

The plurality's interpretation of 8 AAC 15.160(d) to allow such a deduction flatly ignores the federal regulatory definitions and interpretations that have been adopted by the Alaska Department of Labor pursuant to its grant of authority from the legislature. And the plurality's decision affords no deference to the Department's longstanding interpretation of its own regulation to prohibit board and lodging deductions where no alternative public facilities are accessible to the worksite. Finally, the plurality's unique interpretation of the regulatory scheme finds no support in case law from any jurisdiction, federal or state. This is because its interpretation would place the Alaska Wage and Hours Act in direct conflict with the federal Fair Labor Standards Act (FLSA) by allowing an employee to deduct board and lodging costs from wages under cireumstances not recognized as reasonable under FLSA regulations. We have held that "the Alaska Act should be construed to avoid conflicts with the FLSA." 1 And "it is only where state law is more restrictive or more favorable to the employee that it governs in lieu of the federal Act."2 I therefore disagree with the plurality opinions.3

II. THE ALASKA DEPARTMENT OF LABOR HAS ADOPTED FEDERAL REGULATORY DEFINITIONS THAT PREVENT DEDUCTION OF SILVER BAYS LODGING AND BOARD FROM DIAZ'S PAY.

The Alaska Legislature has granted the Alaska Department of Labor broad disere-tionary power to formulate policy consistent with the Alaska Wage and Hours Act.4 Alaska Statute 28.10.145 requires us to apply federal regulatory definitions where terms have not been defined by the Alaska Department of Labors.5 The legislature has left it to the Department's discretion whether federal definitions can be applied consistently with the Alaska Wage and Hours Act.6 The De*739partment has used this broad grant of discretionary authority to adopt regulations requiring an employer's lodging and board charges to be "reasonable"7 and has incorporated federal regulations and interpretations to determine the "reasonable cost" of the employer's board and lodging deductions.8 Under these federal regulations, "reasonable cost" does not include the cost of furnishing board or lodging found to be primarily for the benefit or convenience of the employer.9 Thus, under the Alaska Department of Labor's regulations, an employer may deduct from an employee's wages the cost of employer-provided board and lodging facilities only if the facilities are furnished primarily for the benefit of the employee.

The relevant state regulation, 8 AAC 15.160(d)(8), provides that the cost of employer-furnished board and lodging must be reasonable:

Nothing in (a) of this section prohibits deductions from earnings, based on a written agreement, to reimburse an employer for the reasonable cost of furnishing board and lodging, if
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(3) the cost to the employer for the use of the employer's board and lodging facilities, is reasonable and without profit to the employer

(Emphasis added.) The regulations expressly provide that the director of the Wage and Hour Division will make a determination of "reasonable cost" based on standards set forth under the FLSA, adopting by reference the FLSA's regulations pertaining to the determination of "reasonable cost."10 The language of 29 C.F.R. § 581.3(d)(1) excludes from the definition of "reasonable cost" the cost of furnishing meals and lodging that are primarily for the benefit or convenience of the employer:

The cost of furnishing "facilities" found by the Administrator to be primarily for the benefit or convenience of the employer will not be recognized as reasonable and may not therefore be included in computing wages.

In addition, "reasonable costs" may not exceed the employer's actual cost,"11 may not include a profit to the employer,12 and may not exceed the "fair rental value" or "fair price" of the employer-provided lodging.13

Thus, to determine "reasonable costs" in accordance with these provisions of the Code of Federal Regulations, a threshold determination must be made as to whether the housing and meals at issue are being furnished primarily for the benefit or convenience of the employer or the employee. Only when the lodging and board are found to be provided primarily for the convenience of the employee does one move to the second step of evaluating whether the amount to be deducted from the employee's wages is the reasonable value of the furnished board and lodging. In this case, it is clear from the record that the lodging and board that Silver Bay furnished to Diaz were primarily for Silver Bay's benefit, and thus could not be deducted from Diaz's wages as "reasonable costs."14

*740III. THE DEPARTMENT OF LABORS LONGSTANDING AND CONSISTENT INTERPRETATION PROHIBITS DEDUCTIONS OF LODGING AND BOARD COSTS FROM DIAZS WAGES.

In addition to adopting by reference the federal "convenience to the employer" doe-trine, the Department also codified this doctrine. Indeed, the language of 8 AAC 15.160(d)(1) expressly prohibits deductions for board and lodging in the two most common cireumstances where board and lodging have been found to be furnished primarily for the employer's business convenience or benefit: (a) where no alternative public board and lodging facilities are accessible to the work-site; and (b) where the employer requires the employee to accept the employer's facilities to meet some need of the employer even though alternative facilities are available. The Department's longstanding interpretation of 8 AAC 15.160 to prohibit lodging and board deductions where no alternative public facilities are accessible to the employer's worksite is both consistent and reasonable.

Alaska Administrative Code regulation 8 AAC 15.160(d)(1) provides that board and lodging deductions from wages are prohibited in two cireumstances: (a) at a remote location where there are no alternative public board and lodging facilities accessible to the worksite; and (b) where the employer requires the employee to use the employer's board and lodging even though alternative public housing is accessible to the worksite. This is how the Department of Labor has interpreted its regulation-disallowing such deductions even where they do not reduce the employee's pay below the minimum wage.

In 1998 Randy Carr, the Department's Chief of Labor Standards and Safety, issued an opinion letter to Diaz based on the specific facts of Diaz's employment with Silver Bay and concluded that employers may only deduct room and board from wages where alternative facilities are accessible to the worksite and employees voluntarily choose to reside in employer-provided facilities, regardless of whether they reduce the employee's pay below the minimum wage.15 Carr confirmed that "8 AAC 15.160(d)(1) requires that alternative facilities be accessible to the worksite and that use of the employer's facilities be voluntary in order for such a deduction [for lodging and board] to be allowed.... When work is performed at a remote site, the use of employer-provided room and board is a condition of employment. It is not voluntary. No deduction may be made." Moreover, in response to a query whether his conclusion "depend[s] in any way on whether the deductions from wages reduce an employee's wage rate below Alaska's statutory minimum rate," his answer was "No." Carr proceeded to point out that whereas 8 AAC 15.160(c) specifically states that deductions for transportation are allowed so long as they do not "reduce the employee's wages below the statutory minimum," no such requirement is contained in 8 AAC 15.160(d), leading to the conclusion that the prohibition of deductions from wages for involuntary lodging is entirely independent of the statutory minimum wage.

Carr later confirmed that this opinion letter accurately reflects both the Department's current interpretation of the regulation and its interpretation at the time of the regulation's adoption in 1985. An earlier opinion letter issued by Carr in 1985, at the time the regulation was being drafted, confirms the longstanding consistency of this interpretation.16 When asked if charges for room and board could be withheld from an employee's wages, Carr, then statewide Supervisor of the Labor Standards and Safety Division, responded:

Yes, if alternate facilities are available and the employee has declined the use of such alternate facilities.... Deductions for the cost of room & board are not permitted on floating processors or shore based operations where alternate facilities are not available.

We uphold an agency's interpretation of its own regulations unless it is "plainly erroneous."*74117 Although under this deferential standard we "exercise our independent judgment in determining the validity of an administrative regulation and in interpreting the underlying regulation," we "will not substitute our judgment for that of the ageney with regard to the efficacy or wisdom of the regulation."18 Even under the independent judgment standard, this court "gives some weight to what the agency has done, especially where the ageney interpretation is longstanding."19

The plurality opinion today affords no deference to the Alaska Department of Labor's interpretation of 8 AAC 15.160. Carr testified that the Department's purpose in writing the regulation was to prevent employers from requiring employees at remote work sites to "shoulder the cost of the employers doing business." Thus, adoption of 8 AAC 15.160(d)(1) reflected a clear policy choice, and policies regarding the determination of allowable wage deductions are squarely within the Department's purview and expertise.

Moreover, the Department's interpretation is longstanding and, contrary to the plurality's suggestion, consistent. The Department has always maintained that 8 AAC 15.160 prevents employers from deducting the cost of board and lodging from employee wages at remote work sites where no alternative housing is available. Regulations implementing the Alaska Wage and Hours Act were not adopted until 1974, but at that time they did not address wage deductions for board and lodging.20 A 1969 letter from then Attorney General G. Kent Edwards provided that deductions for room and board were not permitted unless the director decided otherwise:

The Alaska Legislature enacted AS 28.10.085 as a permissive statute, leaving the board and lodging deductions at the discretion of the director. By doing so, if is apparent that the legislature intended that no board and lodging deductions be made unless and until the director so provides by regulation.

(Emphasis added.)

In 1982 a team from the Department began to redraft what is now 8 AAC 15.160. Notice of the proposed regulations was published in newspapers throughout Alaska in 1983, and hearings were held the same year. The record reveals that companies likely to be affected by the proposed regulation understood it to mean that employers operating in remote locations where no alternative lodging facilities were available would have to bear the cost of employee room and board."21 Donald Wilson, then Deputy Director of the Labor Standards and Safety Division, noted that the Department elected not to change the regulation in spite of opposition by employers as it was designed to prevent employers from shifting their costs to employees:

Comineo/Alaska, "The Alliance" and Colorado Mining, Inc. also took exception to 8 AAC 15.160. We do not intend to make any changes to this section since the law is quite clear with regard to employers causing their employees to shoulder the cost of the employer doing business.

The Department's regulations were adopted in 1985 22 and have remained unaltered.23

In accordance with its purpose of preventing employers from shifting their costs to employees, the Department has from the regulation's inception interpreted it to prevent employers from deducting the cost of room and board from employee wages where *742there are no alternative facilities available. Jim Robison, Commissioner of the Department of Labor from 1982 to 1986, wrote a letter to Warren Gore, then Executive President of the AFL-CIO, explaining that employers were not permitted to charge their employees to use employer-owned facilities where no public lodging was available:

Governor Sheffield has provided me with a copy of your letter ... concerning employer campsite requirements for remote work. Having reviewed your comments, I would like to offer an explanation of the Department of Labor's interpretation of these regulations.
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Employers operating in remote areas where there is no public housing available which is immediately accessible or in close proximity to the work site are prohibited from charging employees for the use of any employee facilities....

An affidavit submitted by Robison in this case confirms that the letter to Gore accurately reflected the Department's interpretation of 8 AAC 15.160(d) at the time it was adopted. Robison also specified that it was Department policy that employers who operate in remote areas with no public housing were prohibited from charging employees for the use of employer-owned room and board. Finally, Robison confirmed that the opinion letter written by Carr for Diag's case aceu-rately reflects the Department's interpretation.

These interpretations by current and former Department officials are also consistent with the Department's administrative decisions on this issue. For example, in RAhule v. Gildersleeve, the Department determined that an employer's deductions from an employee's wages to pay for room and board were unlawful because there were no alternative board and lodging facilities accessible to the remote worksite.24 Rhule was an employee at a remote logging camp who was required to authorize, before beginning employment, a deduction from his wages of $12 per day to cover the cost of room and board.

After quoting in full 8 AAC 15.160(d), a Wage and Hour investigator from the Department's Juneau regional office informed Gildersleeve Logging:

The key factor is that there are no alternative facilities accessible to the worksite. This alone, renders all other arguments moot. The fact that this arrangement is also a condition of employment reinforces our determination that deductions for room & board under these conditions do not meet the requirements of [8 AAC 15.160(d) ].

(Emphasis added.) This Wage and Hour investigator emphasized to Gildersleeve that "the fact that there are no alternative public board and lodging facilities accessible to the worksite renders any deduction from wages unlawful."

And Silver Bay itself was the subject of a similar wage complaint in 1998. In Chapman v. Silver Bay Logging, the Department informed Silver Bay that it was not permissible to deduct the cost of room and board when alternate facilities were not available:25

Please note that there are three criteria which must be met in order for deductions for room and board to be considered permissible. In order for board and lodging deductions to be valid, alternative public board and lodging facilities must be accessible to the worksite and the employee must have declined to use such facilities.... Unless you can prove that alternative public board and lodging facilities were accessible to the work site and that Mr. Chapman and other workers declined to use such facilities, the deductions for board and lodging are not permissible.

Thus, the record reveals that the Department of Labor has maintained a single, consistent interpretation of 8 AAC 15.160 since the regulation's promulgation in 1985. The Department's administrative actions reveal one policy: Employers are not permitted to make wage deductions for room and board unless alternative facilities are available and the employee has declined to use them-even *743where those deductions would not reduce the employee's pay below minimum wage.

The plurality has accepted Silver Bay's argument that there was not a single, consistent interpretation of the regulation and that the plurality therefore owes little deference to the Department's interpretation. Silver Bay relies on the testimony during the course of this litigation of Donald Wilson, who served as Deputy Director of Labor Standards from 1988 to May 1987. Wilson is now retired. Wilson was part of the original team that drafted the regulation. He was deposed for this case and provided his own interpretation of the regulation. Wilson testified that he did not intend to prohibit deductions for room and board where there was no alternative to employer-owned lodging. He characterizes the employee choice of lodging this way: "He can turn down the job and go somewhere else. That is the choice. ... It is the interpretation of the law as I live it."

However, the plurality overlooks the fact that while Wilson was at the Department, his interpretation was identical to that of Diaz and the other Department witnesses in this case. In a September 19, 1986 memorandum, Wilson explained to then Commissioner Robison that 8 AAC 15.160(d) required that employers operating at inaccessible sites provide their employees with transportation or bear the cost of room and board:

Because [of the company's provision of free, daily, round-trip transportation from Nome to the worksite] and the ready availability of public board and lodging facilities in Nome it is my opinion that [the company] can legally apply the terms of 8 AAC 15.160(d) and charge the reasonable cost of board and lodging at the camp site to those employees who elect to use it rather than return to Nome each day.
Of course if [the company] should stop providing transportation and the road condition were to remain hazardous, or if it were rendered otherwise impassable by acts of God, [the company] would then have to bear the cost of providing board and lodging to its employees and subcon-employees.

(Emphasis added.) Wilson also sent a memorandum to Bob Bacolas, Director of Labor Standards in July 1984, stating that

{regardless of whether an employer operates or sub-leases his camp site in a remote area, the employer [is] going to have to bear the burden of providing board and lodging. As long as the employee is essentially institutionalized and canmot commute to his true domicile and the work site except on an imfrequent basis, and then only by commercial carrier, the cost of providing room and board must be borne by the employer. The regulations were heard at public hearing{s]) in the three major population centers of the state.... There may be some employers who think they can cireumvent the law and make a profit. Every time a law is enacted, someone tries to take advantage of it for the reason of financial gain. It is up to the enforcement agency to ensure that such events do not occur.

(Emphasis added.) These two documents authored by Wilson at the time of the regulation's adoption contradict his deposition testimony, given twelve years after his retirement from the Department.

The plurality further relies on a single opinion contained in a letter from the attorney general in 1986. However, such opinions are not binding authority on this court, nor do they have any precedential value26 Furthermore, this particular opinion letter has been challenged by the Department of Labor and therefore is not entitled to great weight.27

In conclusion, when the agency has received such a broad delegation of power to make policy consistent with the Alaska Wage and Hours Act, has drafted a regulation that reflects a policy choice, and has then clearly and consistently implemented that regulation over a period of fifteen years, this court must *744defer to the interpretation unless it is clearly unreasonable.

IV. THE DEPARTMENTS INTERPRETATION OF THE REGULATION IS REASONABLE.

Finally, the plurality concludes that even if the Department's interpretation is longstanding and consistent, it is unreasonable and thus accorded no deference. The plurality maintains that when an employee is required to live in employer-provided housing because this arrangement suits the convenience of the employer, the employer may deduct the cost of that lodging from the employee's wages as long as the deduction does not reduce the wages below the statutory minimum. Yet, the plurality's strained interpretation of 8 AAC 15.160 finds no support in any federal or state decision, and the Department's interpretation is more reasonable.

First, as discussed above, the Department has expressly incorporated the federal FLSA definitions of "reasonable cost" and "customarily furnished," which exclude the cost of furnishing meals and lodging that are primarily for the benefit or convenience of the employer or that do not permit the employee to choose voluntarily to live in the employer-furnished facilities. The Department's interpretation of its regulation to preclude deductions for employer-provided lodging when the lodging is provided for the employer's convenience is thus consistent with the FLSA definitions adopted by the Department under its legislative grant of authority and is therefore reasonable.

Second, the plurality concludes that subsection (d)'s limitations on reimbursement for board and lodging facilities of the employer apply only if the reimbursement would reduce wages below the statutory minimum. The plurality maintains that subsection (d) "cannot serve to prohibit deductions that do not reduce wages below the minimum, because such deductions are permitted by subsection (a)"28 But subsection (d) contains three conditions that must be met before a deduction from earnings can be made for employer-provided housing: (1) alternative public board and lodging facilities must be accessible to the worksite and the employee must have declined to use these available facilities; (2) the employer-provided board and lodging facilities must be customarily furnished by the employer and used by the employees; and (8) the cost to the employee for use of the employer's board and lodging facilities must be reasonable and without profit to the employer. If, as the plurality reasons, these limitations of subsection (d)(1), (2), and (8) do not apply unless wages are reduced below statutory minimums, then employers could require employees to live in their facilities and charge unreasonable or profit-making rates, deducting these charges from wages, as long as the deductions did not reduce the employee's wages below the statutory minimum. It is the plurality's interpretation of this regulation that is unreasonable, particularly in light of its purpose to prevent employers from shifting to its employees the cost of doing business.

Finally, the Department's analysis of the interplay between the various subsections of 8 AAC 15.160 is superior to the plurality's interpretation.29 Randy Carr explained that interpretation in his opinion letter to Diaz. As Carr points out, subsection (a) of 8 AAC 15.160 lists a number of specific deduction practices that are prohibited, despite the presence of a written employment agreement. These banned practices include any deduction that would reduce an employee's wages below the statutory minimum. However, subsections (b), (c), and (d) proceed to describe various types of permissible wage deduction practices and specify that the prohibitions of subsection (a) will not apply to these various wage practices as long as the specific conditions contained within each subsection are met. For example, subsection (c), which allows deductions for certain transportation costs, contains the condition that no transportation deduction may reduce the employee's wages below the minimum wage.

However, the subject of minimum wages is not reflected in subsection (b), which allows deductions from earnings where the employ*745ee directs the employer to pay a sum for the benefit of a creditor, donee, or third party. Thus, even if the directed third-party payment reduces the employee's wages below the statutory minimum, it is permissible. And similarly, subsection (d), which addresses deductions of board and lodging costs, does not contain as one of its conditions that the employee's wages must not be reduced below the statutory minimum. As the Department concluded in the opinion letter, "Itlhe subject of minimum wages is not mirrored in subsection (d), which addresses room and board deductions. If the deduction practices satisfy the three conditions listed in the regulations, a deduction would be legal even if it reduced the employee's wages below the statutory minimum." By implication, however, if any of the three conditions are not satisfied, the deduction cannot be made, regardless of whether this would leave the employee's wages above the statutory minimum.

v. CONCLUSION

When the Alaska Department of Labor promulgated 8 AAC 15.160, it made a policy choice to prevent employers from forcing their employees to "shoulder the cost of the employer doing business." Because the Department has adopted the FLSA regulatory definitions, has consistently interpreted its regulation to prohibit the deductions made from Diaz's wages, and has adopted an interpretation that is not unreasonable, I believe that this court should defer to the Department's view that alternative facilities must be available before an employer may deduct the cost of room and board.

. Webster v. Bechtel, Inc., 621 P.2d 890, 901 (Alaska 1980).

. Alaska Int'l Indus. v. Musarra, 602 P.2d 1240, 1246 (Alaska 1979).

. Because we are equally divided on this issue, the decision favoring affirmance has the effect of a plurality opinion: it will affirm the superior court's ruling in the present case but will not be binding in future cases. Our case law establishes that "[a] decision by an evenly divided court results in an affirmance." Ward v. Lutheran Hosps. & Homes Soc'y of America, Inc., 963 P.2d 1031, 1037 n. 11 (Alaska 1998) (quoting Thoma v. Hickel, 947 P.2d 816, 824 (Alaska 1997)). Moreover, "an affirmance by an equally divided court is not precedent." City of Kenai v. Burnett, 860 P.2d 1233, 1239 n. 11, 1246 (Alaska 1993) (Compton, J., concurring).

. See AS 23.10.085, which states:

(a) The director may adopt, amend, or rescind administrative regulations not inconsistent with the purposes and provisions of AS 23.10.050-23.10.150 that are necessary for the administration of AS 23.10.050-23.10.150.
(b) The regulations may, without limiting the generality of (a) of this section, define terms used in AS 23.10.050-23.10.150, and restrict or prohibit industrial homework or other acts or practices that the director finds appropriate to carry out the purpose of AS 23.10.050-23.10.150, or to prevent the circumvention or evasion of AS 23.10.050-23.10.150.
(c) The regulations may permit deductions by an employer from the minimum wage applicable under AS 23.10.050-23.10.150 to employees for the reasonable cost, as determined by the director on an occupation basis, of furnishing board or lodging if board or lodging is customarily furnished by the employer and used by the employee.

. AS 23.10.145 provides: "If not defined in this title or in regulations adopted under this title, terms used in AS 23.10.050-23.10.150 shall be defined as they are defined in the federal Fair Labor Standards Act of 1938, as amended, or the regulations adopted under it."

. See Dresser Indus., Inc. v. Alaska Dep't of Labor, 633 P.2d 998, 1003 (Alaska 1981). Alaska Stat*739ute 23.10.095 provides that "[the commissioner may adopt regulations and interpretations that are made by the administrator of the Wage and Hour Division of the federal Department of Labor and that are not inconsistent with AS 23.10.050-23.10.150."

. 8 Alaska Administrative Code 15.160(d)(3) (2000). (AAC)

. 8 AAC 15.160(f) provides that "[the director will make the determination regarding the cost of board and lodging under (d)(3) of this section. The determination will be made in accordance with 29 C.FR. §§ 531.3-531.5 and 531.29-531.35."

. See 29 C.F.R. § 531.3(d)(1) (2000).

. 8 AAC 15.1608).

. 29 CFR. § 531.3(a) (2002).

. 29 C.F.R.§ 531.3(b) (2002).

. 29 C.FR. § 531.3(c) (2002).

. The Department's regulations further require that employer-provided board and lodging must be "customarily furnished" by the employer before the employer can require reimbursement. 8 AAC 15.160(d)(2). Under the federal regulatory definition adopted by the Department, board and lodging is "customarily furnished" only when the employee's acceptance of the employer's facilities is "voluntary and uncoerced." 29 CER. § 531.30 (2002).

. Wage and Hour Opinion Letter (WHOL) # 133.

. WHOL #30.

. Bd. of Trade, Inc. v. State, Dep't of Labor, 968 P.2d 86, 89 (Alaska 1998) (quoting State, Dep't of Highways v. Green, 586 P.2d 595, 602 n. 21 (Alaska 1978)).

. Bd. of Trade, 968 P.2d at 89 (citations omitted).

. Usibelli Coal Mine, Inc. v. State, Dep't of Natural Resources, 921 P.2d 1134, 1142-43 (Alaska 1996) (quoting Fairbanks N. Star Borough Sch. Dist. v. NEA-Alaska, Inc., 817 P.2d 923, 925 (Alaska 1991)).

. The original regulations were numbered as 8 AAC 15.050.

. No changes to the proposed regulations were made after comments and hearings.

. 8 AAC 15.160, am. 9/28/85, Register 95.

. 8 AAC 15.160 was last amended in 1999, but the provisions at issue in this case were not altered. 8 AAC 15.160, am. 4/29/99, Register 150.

. Dep't of Labor, Claim J1296-076T (1996-1997).

. Dep't of Labor, Claim J0893-078G (1993-1994).

. Allison v. State, 583 P.2d 813, 816 n. 15 (Alaska 1978).

. Id. (providing that the fact that the opinion of the attorney general had not been challenged entitled his opinion to great weight).

. Plurality Opinion at --.

. WHOL #133.